Australia dampens hope of December rate hike

SYDNEY (AFP) - – Australia's central bank hinted at a pause in interest rate hikes Tuesday, saying further upward moves were required but it was important to strike the right pace.

The Reserve Bank of Australia said it remained "prudent" to, over time, increase the official cash rate from the current level of 3.5 percent, following two successive rate hikes from a 50-year low of 3.0 percent.

Releasing the minutes of its November meeting, at which the board decided to raise rates for a second month by 25 basis points, the bank said global and domestic economic conditions continued to brighten "significantly".

"Looking ahead, (board) members expected that if economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question," the bank said.

"In considering the pace of that adjustment, members were conscious of balancing risks."

Business and consumer confidence remained fragile and stimulus worth more than 70 billion dollars (63 billion US) was beginning to fade, while a stronger dollar could constrain output and dampen inflationary pressure, it said.

"On the other hand, a lengthy period with interest rates at a very low level carried its own risks, particularly once the threat of serious economic weakness had passed," the bank said.

Analysts said the dovish comments had dampened expectations of a third successive rate hike in December, which were stoked last week by stronger than expected jobs numbers.

"They're very non-committal about the near term need for interest rates to rise particularly quickly," said Macquarie Bank economist Hayden Atkins.

"There's still a lot to come that could shift them either way towards a 25 basis point rate hike or to remain on hold."

The Australian dollar, which hit a 15-month high of 94.60 US cents on last week's jobs data and associated confidence of a December hike, slumped on the comments to close at 93.38 US cents.